The Bibel Team: Economic Update 2021

Hey everyone. Eric Bible with the Bible team at Neo Home Loans here today to talk to you about an economic update.

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First thing that we want to discuss is the reopening efforts, triggering around the rollout of the vaccine and controlling the outbreak of the virus. So, with the introduction of multiple vaccines, AstraZeneca rolling into the market Johnson and Johnson, Moderna, and Pfizer, and all showing true success rate and acceptance. So the number of people that are getting vaccinated is, from a national standpoint, we’re blowing away expectations. And with that, that’s allowing the confidence of businesses, governments, and what have you to reopen the in-person economy that we are used to.

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So, what impact does that have on things today? Well, you know, as things were shut down we saw a slowing. Your local restaurants, weren’t serving in person, movie theaters didn’t have patrons, sporting events, theme parks, you name it. So all that industry is now we’re seeing, starting to slowly come back, which is money pouring into our economy. Another component is around unemployment. So during the pandemic, there was a number of stimuli, stimulus bills passed on behalf of a previous administration, current administration, Congress, Senate, you name it that infused capital or money into Americans’ hands through forms of stimulus payments. Also they improved and impacted the unemployment benefits. So added benefit to the folks that were impacted on behalf of the shutdown. They awarded additional funds. Amazing. Unlike anything that we have seen in the past. That helped people maintain putting food on their table, keeping things moving forward. So it was in the moment truly necessary.

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Well, now that things are reopening, those things that the added unemployment benefits are still there. And what we’re seeing have impact is that people were receiving more money on the federal stimulus than they were at their previous jobs. So now with things reopening, going back to the restaurant that you liked or going to the movie theater that you wanted to see that movie that you really loved while they’re, short-staffed. There’s nobody there to help you lines are extremely long. You’re having to wait a tremendous amount of time for food. Well, why? Simple in the fact that people are getting more money not working than they are working. So we’re seeing that having some impact in the reopening efforts. There’s been talk at the federal level of kind of allowing those components, those added stimulus funds to expire. And, this is not to get political. No politics at all in this conversation, but really understanding what’s happening and what impact that is having on all of us as a whole.

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So another component that we want to look at are supply chains and cost of goods. So it’s something that we’re all hearing about. Well, the supply chains have been impacted. Well, what does that mean? So anything that, you know, from this computer to the camera that’s recording this. There are a number of parts pulled from multiple places throughout the country and throughout the world. They all have to come to one universal location to be built. Well, you look at other parts of the world like India right now, who is essentially going through what we felt a year ago. Completely just overtaken by the coronavirus. Same in other parts of Asia. A lot of our production for those components come out of those pockets of the world. Well, if they’re dealing with the pandemic and effectively shut down, where are those things coming from?

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They’re not. You know, so with that we’re seeing a disruption in the construction of goods and ultimately the distribution of goods, which is ultimately jacking the cost of those raw materials way up. I mean, a good example here is the cost of lumber. So from August of 2020 through April of 2021 lumber rose over 375%. Think about that for a second. The cost of wood. What is would use for? Essentially everything that we look at here in the United States. 375% increase. Insane. So that is having a spill over effect of why we’re starting to see the cost of items. Rise, and rise, rapidly. Cost to build houses. And we’re already suffering, as we’ve talked in previous videos about supply. We do not have enough homes to satisfy demand. So if the cost of materials, I’m looking at building a wood fence, well, a year ago it costs me, call it $3,000. Now it’s 375% more just for material. Think about that from a housing standpoint.

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And it’s not just lumber that we’re seeing that on. We’re seeing it in copper, we’re seeing it in microchips. There’s a severe shortage of microchips. We’re seeing it in food products. I was reading an article this morning around chicken wings. Chicken wings have, from January of 2021 to may of 2021, the cost of chicken wings at wholesale level have more than tripled. So those, you know, all you can eat wing night might be sidelined for a little bit. So, we’re experiencing some extreme volatility within the supply markets within the distribution channels.

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I mean, again, we look back to the Suez canal. One that controls 10% of global trade. There was a ship stuck in the middle, obviously nothing to do with the pandemic, but that shut down that section of the country, which we don’t feel that immediately. It doesn’t happen overnight. You know, it takes those ships anywhere from three weeks to a month and a half to get to its final destination here in the United States. So, what was passing through in March we should have already received now. So now we’re seeing, you know, coupled with the cost of goods, rising. Well, supply is way down, because it’s just not available.

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So what happens from here? What does that mean for all that’s going on? Why am I talking about this? Well, the biggest concern that all of this plays into to effect, you know, from the economic reopening, all the stimulus money that was printed to the cost of goods; inflation. What is inflation? The devaluing of currency. So the value of currency lowering, the value of our dollar driving down while the cost of goods rises. So here, with all of this going on, the main concern that we’re experiencing is around inflation.

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Why inflation? Inflation in some instances is good. We want normal inflation just because it has to accommodate that the value of things have to rise and balance with the cost of your currency. But when inflation is hyper, when it happens immediately, you know, overnight, that is a very, very scary thing. And really why I bring this up is that that can have impact in what interest rates will do. Ultimately inflation, the way to combat inflation is to raise rates, raise the cost of money for people to borrow, banks, to borrow, you and me to borrow funds. That gets combated by the federal reserve, ultimately adjusting the federal funds rate, which in turn will have impact to help curb or slow inflation.

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So really what we’re looking at is, again, I don’t want this to be all doom and gloom. I want to give you the raw information around what is happening, what we expect to happen on a go-forward basis. So ultimately, that said, we’re still in a phenomenal place. Again, it is an ideal time to purchase or sell real estate. It’s a great time to be in the United States. There is so much good happening everywhere we look at it. But what we’re seeing and just being ultra-sensitive and aware of what’s happening and why the things are happening as they are is, around the fact that we were shut down for almost 13 months. And now things are opening back up. And there’s a lot of anxiety around what that looks like on the end phase.

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But all in all, the outlook still remains very, very, very good. And I just wanted to give some insight around what we’re experiencing in the current context. And again, we would love to get into this with greater detail with you. Please reach out to myself and my team today. Thank you.

 

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